Fittler v Graham [2010] FJHC 181; HBC225.2009 (27 May 2010)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No. HBC 225/2009

Between:

MALCOM FITTLER
of 111A Bruxner Park Road, Coffs Harbour NSW 2450, Australia,
Businessman and/or nominee (together with his executors administrators and assigns
1ST PLAINTIFF

And:

ROBIN WAYNE JUDD
of Villa 18 Five Islands Drive, Coffs Harbour NSW2450, Australia,
Businessman and/or nominee (together with his executors administrators and assigns).
2ND PLAINTIFF

And:

ROBERT BACKHOUSE
of 11 Jacklyn Close, Boambee, Coffs Harbour NSW 2450, Australia,
Businessman and/or nominee (together with his executors administrators and assigns).
3RD PLAINTIFF

And:

JOHN LAURENCE ORFORD
of 6 Beauford Ave, Caringbah, 2229, Australia, Businessman and/or nominee
(together with his executors administrators and assigns).
4TH PLAINTIFF

And:

HERCULES KARAKOSTAS
of Australia, Businessman and/or nominee
(together with his executors administrators and assigns).
5TH PLAINTIFF

And:

ANGELO DRITSAS
of Australia, and/or nominee
(together with his executors administrators and assigns).
6TH PLAINTIFF

And:

GRANT ROBERT GRAHAM & BRENDON JAMES GIBSON
of level 16, 45 Queen Street, Auckland, New Zealand in their capacity as Joint and Several
Receivers of Aanuka Island Resort Limited trading as Amunuca Island Resort Limited.
1ST DEFENDANTS

And:

NATIONAL BANK OF FIJI LIMITED trading as COLONIAL NATIONAL BANK
a body corporate duly constituted under the Companies Act Cap 247 of 3 Central Street, Suva, Fiji.
2ND DEFENDANT

And:

COLONIAL FIJI LIFE LIMITED
a body corporate duly constituted under the Companies Act Cap 247 of 3 Central Street, Suva, Fiji.
3RD DEFENDANT

Counsels: K. Muaror - Muaror & Company for the Plaintiffs
S. Banuve -Howards Lawyers for the Defendants

Date of Hearing: 11th May, 2010
Date of Oral Ruling: 19th May, 2010
Date of Written Ruling: 27th May 2010

RULING
(Striking Out – Order 18 Rule 18(1)(a))

BACKGROUND

[1]. The plaintiffs (except the 2nd and 3rd plaintiffs) were shareholders of Aanuka Island Resort Limited ("AIRL"). The resort had acquired a native lease (NLC 684) from the Native Lands Trust Board over an island off the Western Viti Levu coast. In time, AIRL was to subdivide the land in accordance with its integrated resort development plans on the island which incorporates both a luxury beach resort hotel and residential lots.

[2]. That project was, in part, funded by a loan of $9, 570,000 from Colonial National Bank ("CNB") and Colonial Fiji Life Limited ("CFLF") the second and third defendants. That loan was secured by a registered mortgage and debenture on the resort lease.

[3]. After AIRL had subdivided the land, it allocated to Fittler, Karakostas, Orford and Dristas (1st, 4th, 5th and 6th plaintiffs - who are shareholders in the resort) some lots. Meanwhile, at some stage, Judd and Backhouse (the 2nd and 3rd defendants - who were not shareholders in AIRL), teamed up with Fittler and together, they acquired another lot jointly in equal shares. The documentation filed suggests that they did so in consideration of the sum of $800,000 (eight hundred thousand dollars).

[4]. All in all, the plaintiffs claim a beneficial interest over ten (10) lots in total. Meanwhile, over the years, the resort began to default in paying off its mortgage debt. Finally, in November 2008,

CNB and CFLL appointed Graham and Gibson (the first defendants) as receivers/managers for AIRL as provided for under the debenture.

[5]. At some point in 2009, Graham and Gibson started to put the resort up for sale on the market.

From the documents filed, it appears that settlement negotiations were well underway. Then in December 2009, the plaintiffs filed an urgent injunction application to stop Graham and Gibson from selling the ten lots in question together with the rest of the land.

INTERIM INJUNCTION APPLICATION

[6]. The application was heard by Mr. Justice Fernando. The vital point which Fittler deposes in his supporting affidavit is that the ten (10) lots were not part of the security that was offered up to the Bank for the loan. Fittler goes a step further and says that this was understood and agreed between the parties and was in fact a "special condition" of the mortgage. Hence, the ten (10) lots should not be included in the proposed sale of the resort by Graham and Gibson.

[7]. Fittler concedes though in his affidavit that the mortgage documents did not properly reflect this special condition. However, he maintained that Mr. Mohammed Harun, a representative of AIRL, had committed CNB and CFLL to the alleged special condition through various e-mail communications to Fittler.

[8]. The defendants however were adamant that the security offered to CNB and CFLL included the ten (10) lots.

[9]. In time, Fernando J was to refuse the interim injunction sought. He did so "on the undertaking of defendants for damages, which would be the market value or the value pro-rata, as set out in the most recent valuation.."

[10]. The ten (10) lots have since been sold by the defendants.

APPLICATION BEFORE ME

[11]. The plaintiffs’ injunction application had been prepared and filed in urgency. A writ with an indorsed claim was filed simultaneously with the injunction application. The claim merely regurgitates the same prayers in the Motion seeking the interim injunctive relief.

[12]. What is before me is an application by Howards Law to strike out the indorsed claim on the ground that it discloses no reasonable cause of action under Order 18 Rule 18(1)(a).

[13]. It appears that well after Fernando J refused the interim injunction sought, the plaintiffs have been dilatory in not taking any steps to move the case further. The indorsed claim has remained as it was with the same prayers seeking the interim injunctive relief.

[14]. Understandably, the defendants have not filed a defence to date because of the lack of any allegation of fact in the statement of claim. Mr. Banuve submits that because the plaintiffs have failed take steps to amend their claim to plead facts properly, he has had to file this application to strike out the claim to at least allay the threat of a default judgement hanging over his clients’ heads.

THE LAW

[15]. The principles relating to an Order 18 Rule 18 (1)(a) striking out application was succinctly summarized by Mr. Justice Kirby in Len Lindon -v- The Commonwealth of Australia (No. 2) S. 96/005 as follows:-:

1. it is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against Government and other powerful interests. This is why relief, whether under O 26 r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided.

2. to secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action ....or is advancing a claim that is clearly frivolous or vexatious...

3. an opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination......Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.

4. summary relief of the kind provided for by O 26 r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer....... If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.

5. if, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading ......A question has arisen as to whether O 26 r 18 applies to part only of a pleading

6. The guiding principle is, as stated in O 26 r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the Court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.

(my emphasis).

[16]. Usually, in exercising this jurisdiction, the Court will assume as factually true all the allegations in the claim. If the pleaded facts do raise a legal issue, then the courts will not strike out a pleading.

ISSUES

[17]. Mr. Muaror openly admits that the reason he has not amended the claim has been due in part to his oversight and in part because of the difficulty of contacting his clients who all reside overseas.

[18]. To reiterate, the indorsed claim pleads no fact or facts on which any judicial redress or relief sought by the plaintiffs might be established. It has remained as it is long after the injunction was refused in December 2009.

[19]. Mr. Muaror urges the court to consider the affidavit of Fittler that was filed in support of the interim injunction application. That affidavit, according to Mr. Muaror, sets out the issues between the parties.

[20]. Mr. Banuve submits that Fittler’s affidavit was filed only for the purpose of the injunction application. He submits that Fernando J had considered that affidavit and had refused to grant the relief sought. The affidavit therefore is not relevant to the striking out proceedings.

[21]. Should I then turn to the affidavit material that were filed and considered in the now-failed injunction application to decide whether there is any real legal question of importance subsisting between the parties?

[22]. In considering the above question, I remind myself that one of the issues that would have confronted Fernando J when he dealt with the interim injunction application was whether or not, on the affidavit material before him, there is any serious issue to be tried.

[23]. I also remind myself that, in a striking out application under Order 18 rule 18 (1)(a), the principle issue is whether there is a serious issue between the parties that ought to be left for the trial.

"....If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts".

(as per Kirby J in Len Lindon -v- The Commonwealth – see paragraph 19 above).

DETERMINATION

[24]. In this case, having considered the interests at stake, and the way this case has unfolded, I believe the correct approach for me to take is to simply look at Fernando J’s ruling to see what his conclusions were on the question: whether there is any serious issue to be tried?.

[25]. In this case, Fernando J’s ruling clearly shows that he had reached the conclusion that the issue of whether or not the ten (10) lots in question were in fact part of the security is a serious one to be postponed for the substantive trial:

"Therefore, application for interim injunction is refused subject to the undertaking of defendants for damages, which would be the market value or the pro-rata, as set out in the most recent valuation whichever is higher of the blocks identified by the plaintiffs, until the final determination of this action"

[26]. Having noted the above, I believe it would be consistent with principle that my discretion should be exercised in favour of allowing Mr. Muaror some time to plead his clients’ case properly.

[27]. I note also that in their submissions opposing the injunction, the defendants solicitors had submitted as follows:

".....the only viable remedy the Plaintiffs would have, if any, against the Second and Third Defendants would be to seek damages"

[28]. I agree with the above. The cause of action that may yet subsist between the parties notwithstanding the sale of the ten (10) lots may have to be one based on an allegation of some breach by the defendants.

[29]. I accept that the approach I have taken in determining "whether there is a serious issue" has strayed a wee bit out of the ordinary. I believe though that it is consistent with the principles as set out by Kirby J above.

ORDERS

(i) application to strike out is dismissed.

(ii) costs normally follow the event but because this case has only moved forward after the filing of the application, I order that the plaintiffs pay $350 costs to Howards Lawyers in 14 days.

(iii) plaintiffs to file and serve their amended statement of claim in 14 days.

(iv) case adjourned to 07th of June 2010 for mention.

Anare Tuilevuka
MASTER

At Lautoka
27th May 2010.